Factors of Production Functions.

1. P R O D U C T I O N F U N C T I O N S A N D I T S
I M P O R T A N C E
ECONOMICS FOR DECISION
MAKING

2. PRODUCTION FUNCTION’S 4 FACTORS
 LAND
 LABOR
 CAPITAL
 ORGANIZATION
This is evident from the fact that no single commodity
can be produced without the help of anyone of these
four factors of production.
The producer maximize his profit by means of best
combination of factors of production.

3. PRINCIPLE OF EQUIMARGINAL RETURNS AND
SUBSTITUTION
 This principle states that any producer can have
maximum production only when the marginal
product of the land is equal to that of labor, capital,
and organization , the production becomes
maximum.

4. MEANING OF PRODUCTION FUNCTION
 Production function refers to the functional
relationship between the quantity of the good
produced (output) and factors of production
(inputs).
 “The production function is purely a technical
relation which connects factors inputs and outputs.”
- Prof. Koutsoyinnis

5. MATHEMATICALLY…..
 Mathematically, such a basic relationship between
inputs and outputs may be expressed as,
Q=f(L,C,N)
Where Q= Quantity of output
L= Labor
C= Capital
N= Land

6. FEATURES AND IMPORTANCE OF PRODUCTION
FUNCTION
1. SUBSTITUTABILITY
The factors of production or inputs are substitutes
of one another which makes it possible to vary the
total output by changing the quantity of one or a
few input are held constant. It is the
substitutability of the factors of production that
gives rise to the laws of variable proportion.

7.  COMPLEMENTARITY
The factors of production are also complementary to
one another , that is, the two or more inputs are to be
used together as nothing will be produced if the
quantity of either of the input used in the production
process is zero.

8.  SPECIFICITY
It reveals that the inputs are specific to the production
of a particular product. Machines and equipments ,
specialized workers and raw materials are a few
examples of a specificity of factors of production.

9. In production function, variation in total output by
varying the quantities of all inputs is possible only in
the long run where as the variation in total output by
varying the quantity of single input may be possible
even in short run.